SAO PAULO (Reuters) - Canadian farm equipment maker Ag Growth International Inc AFN.TO plans an aggressive expansion through acquisitions in Brazil following the overhaul of its first South American plant, which it bought last year, a senior executive said.
AGI spent $40 million to buy and modernize the factory in Sao Paulo state and plans to recover that investment in three to five years, said Wilfried Toth, head of operations in Brazil.
“Growing through acquisitions is in our DNA,” Toth said in an interview, adding that the company has mapped out 59 grain storage manufacturers in Brazil which are potential acquisition targets.
Aside from a few competitors such as market leader Kepler Weber SA KEPL3.SA and GSI, owned by rival AGCO Corp AGCO.N, the market is fragmented among small local operations, he said.
AGI wants to stand out in Brazil by financing clients through a barter program, which local producers now use for fertilizer and pesticides but not equipment, he said. Under such a program, AGI finances its clients and receives grain as collateral until the debt with the equipment maker is paid out.
Toth said tight credit from state banks had shrunk Brazil’s grain storage market by about 25 percent from its peak in the first three years of the decade, but it still was worth about 1.5 billion reais ($460 million) per year.
AGI, with $700 million in annual sales, is the latest foreign investor to be drawn to Brazil’s expanding agricultural frontiers and climate offering two annual harvests.
The owner of farm equipment brands such as Hi Roller, AGI has 25 factories in the United States, United Kingdom, Canada, Italy and South Africa, according to the company.
The Cândido Mota plant in São Paulo state, which took seven months to renovate, will cater to both the domestic and export markets. AGI’s new factory has already sold equipment to clients in Ecuador, Paraguay and Bolivia.
The plant is the only one that can manufacture all of AGI’s farm equipment brands, but the company plans to replicate that capability in Italy, Toth noted.
Reporting by Ana Mano; Editing by Lisa Von Ahn